Wage & Hour Audits Net $135 Million in Backpay
January 1, 2007
by Employment & Labor Law / Employee Benefits Group
Stinson Morrison Hecker LLP
Copyright © 2007
Employers paid over $135 million in minimum wage and overtime back wages as a result of audits by the U.S. Department of Labor’s Wage and Hour Division in fiscal year 2006, according to agency enforcement data released December 28, 2006. By far, violations of the Fair Labor Standards Act’s (FLSA) overtime requirements were the most costly to employers.
Minimum Wage – Only 11 percent ($15.2 million) of the back wages collected by the Wage and Hour Division were for FLSA minimum wage violations. Over 52,700 employees received back wages for minimum wage violations in fiscal year 2006, with the average payout being $289.
Overtime Violations – In contrast, 89 percent ($120.5 million) of the back wages collected by the Wage and Hour Division were for FLSA overtime violations.
- Average Payout – Nearly 195,000 employees received back wages for overtime pay violations, with the average payout being $619.
- Administrative Exemption – Over $13.2 million was collected for approximately 12,000 employees for violations of the revised Overtime Security regulations. The violation most frequently cited was one in which the employee's primary duty was not “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers.” This violation of the administrative duty test was cited in 353 cases and affected approximately 2,800 employees.
Child Labor Penalties – In addition, the Wage and Hour Division assessed employers $2.9 million in FLSA civil money penalties for violations of child labor laws. The majority of child labor violations occurred when workers under the age of 16 worked too many hours, too late at night, or too early in the morning.
Low Wage Industries – The Wage and Hour Division continues to pursue compliance in low-wage industries that employ young and immigrant workers. In fiscal year 2006, the agency collected over $50 million in back wages for workers in nine low-wage industries, nearly a third of which worked in restaurants.
Duration of Audits – On average, it took the Wage and Hour Division about three months (93 days) in fiscal year 2006 in which to complete its audit and close out a case, down from 139 days in fiscal year 2001.
Sharp Decline in Number of Family and Medical Leave Act Complaints Filed
The number of Family and Medical Leave Act (FMLA) complaints filed with the U.S. Department of Labor (DOL) dropped 19 percent in fiscal year 2006, to just 2,161 – the lowest number in six years, according to agency enforcement data released December 28, 2006.
Reason for Complaints – Termination (40%) continues to be the most frequent reason FMLA complaints were filed, followed by refusal to grant FMLA leave (24%), discrimination (22%), refusal to restore to an equivalent position (12%), and failure to maintain health benefits (1%).
Most Result in No Violation – Nearly half (49.5%) of all FMLA complaints filed resulted in a finding of no violation. Reasons for dismissal of FMLA complaints included a finding that the complaint was not valid, the employee was not eligible for FMLA leave, and that the employer was not covered by the Act.
FMLA Backpay – The DOL collected nearly $1.8 million in back wages for violations of the FMLA for 1,200 employees in fiscal year 2006, with the average payout being $1,477.
Record Recovery by OFCCP in Affirmative Action Plan Audits
Employers collectively paid a record $51.5 million to the Office of Federal Contracts Compliance Programs (OFCCP) in fiscal year 2006, following affirmative action plan audits, "for workers who had been subject to unlawful employment discrimination," according to the agency’s enforcement statistics released in December 2006.
Significant Increase – The $51.5 million reflects a 14% increase over the OFCCP’s recoveries in fiscal year 2005 and a 78% increase over fiscal year 2001. The $51.5 million was shared among 15,273 workers, with an average payout of $3,374, a record high.
Active Case Management System – "Compared with years past, OFCCP more quickly and accurately screens contractor establishments for indicators of potential discrimination with its Active Case Management (ACM) system. Under ACM, which was fully implemented in each of OFCCP’s regions in fiscal year 2005, the agency opens more reviews than it did in the past and the agency uses automated statistical tools to rank and prioritize establishments for further review based on the probability that discrimination would be uncovered during a full-scale review."
Systemic Discrimination – Of the $51.5 million recovered, "88% was collected in cases of systemic discrimination – those involving a significant number of workers or applicants subjected to discrimination because of an unlawful employment practice or policy." The OFCCP is using Active Case Management to identify and resolve cases of systemic discrimination with greater frequency.
More Conciliation Agreements – The use of Active Case Management has also led to a sharp increase in the number of employers who have agreed to conciliation agreements. In fiscal years 2005 and 2006, OFCCP closed an average of 11.7% of compliance evaluations with a conciliation agreement, up from 6.7% in fiscal year 2004.
Greater Likelihood of Audit – With its Active Case Management, OFCCP is monitoring a larger portion of the federal contractor universe than it has in the past and is prioritizing its resources to address the "worst offenders of the law."
Stinson Morrison Hecker LLP is one of the country's largest law firms with more than 335 attorneys in more than 45-industry-focused areas. If you would like more information regarding this summary, please contact one of our Employment & Labor Law and Employee Benefits attorneys.
Law at Work is designed to give general information and is not intended to be a comprehensive summary or to treat exhaustively the subjects and matters covered. The information appearing herein does not constitute legal advice or opinions. Such advice and opinions are provided only upon engagement with respect to specific factual situations. Nothing contained herein shall be considered as an admission in any matter or controversy.
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